Wall Street billionaire investor Wilbur Ross has acquired 21% stake in Virgin Money for GBP100m, bolstering the UK-based banks' ambitions to form a national high street chain of banks by acquiring the national branch network being sold by Royal Bank of Scotland (RBS).
Reportedly, Mr Ross is expected to make a further investment of upto GBP500m to help Virgin Money acquire 318 RBS branches that were put on sale after the European Commission asked RBS to divest core assets to repay the taxpayer funds it received at the height of the financial crisis.
Alongside 1.8m retail customers, which is 2% of the UK retail market, the RBS network has a robust business banking offering with corporate and business banking centres. Further, it also has 230,000 small and medium-sized enterprise customers, 5% of the total SME market, with its 1,200 mid-corporate customers worth 5% of the medium-sized company market.
Virgin Money is likely to face opposition from Spanish banking major Santander and National Australia Bank. JC Flowers, the private equity firm that tried to acquire Northern Rock two years ago, is also said to be entering the fray.
However, Mr Ross’ investment is expected to attract investments from North America and from sovereign wealth funds in the Middle East and Asia.
Virgin Money has also separate plans to build a network of 70 branches by 2015, including a GBP10bn loan book.
Mr Ross is chairman of WL Ross & Co, which is said to have struck more than GBP132bn of corporate deals around the world over the past three decades. WL Ross & Co manages funds that own American Home Mortgage Services and has investments in Assured Guaranty, Bank-United and Montpelier Reinsurance.